Magellan Midstream Partners LP (NYSE:MMP) Q1 2017 Earnings Conference Call - Preliminary Transcript

May 03, 2017 • 01:30 pm ET

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Magellan Midstream Partners LP (NYSE:MMP) Q1 2017 Earnings Conference Call - Preliminary Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Magellan Midstream Partners First Quarter 2017 Earnings Results Conference Call. Today's call is being recorded.

At this time, I would like to turn the conference over to Mike Mears, Chief Executive Officer. Please go ahead.

Executive
Michael N. Mears

Good afternoon, and thank you for joining us today to discuss Magellan's First Quarter Financial Results. Before we get started, I'll remind you that management will be making forward-looking statements as defined by the SEC. Such statements are based on our current judgments regarding the factors that could impact the future performance of Magellan. You should review the risk factors and other information discussed in our filings with the SEC, and form your own opinions about Magellan's future performance.

As you probably saw this morning, Magellan reported solid earnings for the first quarter of 2017. These results exceeded our previous guidance with each of our operating segments generating higher financial results than the year-ago period. Our CFO, Aaron Milford, will review Magellan's first quarter financial results in more detail. Then, I'll back to discuss our guidance for the year and review the status of some of our larger expansion projects before opening the call to your questions. Aaron?

Executive
Aaron L. Milford

Thank you, Mike. In my comments today, I will be making references to certain non-GAAP financial metrics, including operating margin and distributable cash flow. We've included exhibits to our earnings release that reconcile these metrics to their nearest GAAP measure. Earlier this morning, we reported first quarter net income of $222.7 million or $0.98 per unit on a diluted basis, which was higher than the $207.1 million or $0.91 per diluted unit reported for the first quarter of 2016.

Excluding the impact of mark-to-market futures contract activity in the current quarter, adjusted diluted earnings per unit of $0.96 exceeded our guidance of $0.90 provided back in February. Distributable cash flow was $227.6 million in the first quarter of 2017 compared to $205.3 million reported in the first quarter of 2016. Overall, we're off to a good start for 2017, with all of our business segments showing improved operating margin performance compared to last year's quarter.

I will now move to a brief discussion of the operating margin performance for each of our business segments. Our refined products segment generated $221.3 million of operating margin in the first quarter of 2017, compared to $171.1 million for the same period of 2016. This $50.2 million increase from the first quarter of 2016 is primarily the result of $40 million of out of period mark-to-market adjustments related to our commodity hedging activities. Segment fee-based activities also demonstrated growth over the previous year's quarter.

Transportation and terminals revenues increased $17.1 million, compared to the 2016 quarter. This increase was driven by higher revenues from our Little Rock pipeline which came into service in July of 2016, as well as 4% higher demand for refined products including both gasoline and diesel in our markets excluding Little Rock, as well as 2% higher average tariffs as a result